Updated Interest Rates of Savings Bank Account
Banks were so far paying interest @ 3.5% on savings bank accounts. However, the interest was calculated on the minimum balance by an account holder from 10th of every month to last day of the month. This had bunched withdrawals by account holders before 10th of every month. Why 3.5% interest when banks were lending as high as 12.5% and inflation rate of .10%. This was due to savings bank interest rate being regulated by Reserve Bank of India. Incidentally this is the only interest rate that is regulated by Reserve Bank of India RBI, Since last eight years, banks have benefited to the tune of crores of rupees being the amount kept in savings bank.
The Government is also looking afresh at interest rates on savings bank deposits. RBI has also reviewed the savings bank interest policy for further deregulation. Viewed in the context of of an alternative allowing banks to offer floating rates of interest on internet banking, a greater competition among banks is welcome. This will lead to depositors getting better returns and encourage more savings. As per RBI directives, banks are now paying interest on aberage daily balances instead of the minimum balance by an account holder from 10th of every month to last day of the month.
Deregulation of savings bank deposit interest rates would bring the Indian banks nearer to international banks and closer to world class banking.